NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Anne Layne-Farrar

Charles River Associates

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NBER Working Papers and Publications

October 1995The Schooling Quality-Earnings Relationship: Using Economic Theory to Interpret Functional Forms Consistent with the Evidence
with James Heckman, Petra Todd: w5288
This paper investigates the economic and empirical foundations of the evidence relating earnings to schooling quality. We replicate the Card-Krueger model for Census years 1970, 1980 and 1990 and find that it consistently produces a strong relationship between schooling quality and the rate of return to schooling. We test key identifying assumptions used by Card and Krueger and others. Several assumptions are rejected. When they are relaxed, the evidence for a strong effect of schooling quality on earning is greatly weakened. A crucial identifying assumption is the absence of selective migration on the basis of earnings. Nonparametric tests strongly reject this hypothesis. The conventional assumption of linearity of the earnings- schooling relationship widely used in the literature ...
September 1995Does Measured School Quality Really Matter? An Examination of the Earnings-Quality Relationship
with James Heckman, Petra Todd: w5274
This paper examines the economic and empirical foundations of the aggregate evidence on the effect of schooling quality on earnings. A common framework is presented which nests all previous studies as special cases. We discuss two crucial identifying assumptions and test them. The first assumption is the absence of region of birth - region of resident interactions in the return to schooling. This rules out patterns of migration on the basis of realized earnings in the destination state. Both parametric and nonparametric versions of this hypothesis are tested. Using 1970, 1980 and 1990 Census data, it is decisively rejected. A second assumption is that log earnings equations are linear - or nearly linear in schooling. This assumption is false. We find that estimated earnings-quality...

Published: Burtless, G. (ed.) Does Money Matter? The Effect of School Resources on Student Achievement and Success. Brookings, July 1996.

 
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